How Does the Block Reward Subsidy Affect the Economic Incentive for Selfish Mining?
The block reward subsidy (the newly minted coins) is the largest component of a miner's revenue, especially in the early stages of a cryptocurrency's life. A larger subsidy increases the economic incentive for all mining, including selfish mining, as the potential gain from disproportionately acquiring block rewards is higher.
As the subsidy decreases (e.g. through halving), the focus shifts more to transaction fees.
Glossar
Incentive
Mechanism ⎊ Incentive structures within cryptocurrency, options trading, and financial derivatives function as engineered protocols to align the interests of diverse participants, influencing behavior and mitigating agency problems.
Selfish
Exploitation ⎊ In cryptocurrency derivatives and options trading, "selfish" denotes a strategic, albeit controversial, behavior primarily observed in Bitcoin mining.
Economic Incentive
Alignment ⎊ Economic Incentive describes the mechanism by which protocol designers align the self-interest of individual participants with the collective security and desired behavior of the network, often through the issuance of native tokens as rewards or the imposition of penalties.
Subsidy
Mechanism ⎊ A subsidy, within cryptocurrency and derivatives markets, represents an economic intervention altering the cost basis of an asset or contract, frequently employed to incentivize participation or stabilize nascent ecosystems.
Block Reward Subsidy
Incentive ⎊ A block reward subsidy represents the newly minted cryptocurrency units distributed to network participants, typically miners or validators, as compensation for processing and confirming transactions and securing the blockchain.
Block Reward
Incentive ⎊ A block reward serves as the primary economic incentive for miners or validators to participate in securing a blockchain network.